In Figure 6.9, we showed how bonds with greater credit risk have promised higher yields to maturity. This yield spread goes up when the economic outlook is particularly uncertain. You can check how much extra yield lower-grade bonds offer today by logging on to the Federal Reserve Economic Database (FRED) at the St. Louis Fed website (fred.stlouisfed.org). Search for Corporate Bonds and compare the yields on Aaa and Baa bonds. How does the current spread in yields compare with the spread in November 2008 at the height of the financial crisis?

Figure 6.9

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1954 1957- 1960- 1963- 1966- 1969- 1972- 1975- 1978 1981- 1984- 1987- 1990- 1993- 1996 1999- 2002- 2005- 2008- 2011 2014- 2017- 2020 - Spread on Aaa-rated bonds Yield spread between corporate and government bonds, % 2 W 4 Spread on Baa-rated bonds 5 I Treasury bonds. between corporate and 10-year FIGURE 6.9 Yield spreads